The foreign ministers of the 28 European Union member states passed a resolution Monday promising Israel and the Palestinians an "unprecedented package" of economic, political and security aid if a peace treaty is achieved, Haaretz reported Tuesday.

The European diplomats also guaranteed both sides would be upgraded to "special privilege partnership" the top status for non-member European states, the newspaper said.

After the resolution was passed, the EU conveyed a message to Israel's Foreign Ministry, warning Jerusalem not to underestimate the European offer. The European diplomats also expressed concern that Israel would announce a new round of West Bank settlement construction following the release of a third group of Palestinian prisoners later this month.

"New announcements of settlement activity after the third round of prisoner releases at the end of the month might be a fatal blow for the peace process," the Israeli paper quoted the European diplomats saying. The diplomats warned such a move could lead to the collapse of peace talks with the Palestinians. If this occurs, Israel will be held responsible, the diplomats said.

European diplomats are expected to convey a severe message to Palestinian negotiators when they meet with them Tuesday, Haaretz said.

Under the nine-month framework allocated by the United States to Israel and the Palestinians, a time frame in which to reach a peace agreement, Israel agreed to release 104 Palestinian prisoners incarcerated in Israel before the 1993 Oslo Accords. Israel is scheduled to free the third batch of Palestinian prisoners on Dec. 29.

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